4 Quick Things to Know About Sembcorp Industries Limited’s Dividend

As a quick background, Sembcorp Industries? revenue comes from its three business segments: utilities; marine; and urban development & others. The marine segment?s contribution comes mainly from Sembcorp Industries? 60.99% ownership stake in oil rig builder Sembcorp Marine Ltd (SGX: S51). With a number of different segments, Sembcorp Industries can be said to be a conglomerate.

The conglomerate?s latest 2016 annual report had four key pieces of information related to its dividend that investors may want to know:

1. Revenue is down in the last two years

The following…

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Sembcorp Industries Limited(SGX: U96) is a regular payer of dividends.

As a quick background, Sembcorp Industries’ revenue comes from its three business segments: utilities; marine; and urban development & others. The marine segment’s contribution comes mainly from Sembcorp Industries’ 60.99% ownership stake in oil rig builder Sembcorp Marine Ltd(SGX: S51). With a number of different segments, Sembcorp Industries can be said to be a conglomerate.

The conglomerate’s latest 2016 annual report had four key pieces of information related to its dividend that investors may want to know:

1. Revenue is down in the last two years

The following chart shows Sembcorp Industries’ revenue (or turnover) from 2012 to 2016:

Source: SembCorp Industries’ annual report

Revenue is the starting point of a viable business.

As the chart shows, Sembcorp Industries has had its ups and downs over the past five years. Its revenue had increased from $10.2 billion in 2012 to almost $11 billion in 2014. But the last two years have been rough on the conglomerate. Revenue retreated to $9.5 billion in 2015 and fell further in 2016, down to $7.9 billion.

2. Profit is also down the last two years

In the chart below, you can see Sembcorp Industries’ profit from 2012 to 2016:

Source: SembCorp Industries’ annual report

There is a fairly similar story for Sembcorp Industries’ net profit. Although the company’s bottom-line climbed from $753 million in 2012 to $820 million in 2013, the profit number slipped slightly in 2014 to $801 million. The biggest falls, though, were experienced in the last two years, when net profit slid to $549 million in 2015 and further down to $395 million in 2016.

3. The dividend policy

Sembcorp Industries stated its dividend policy in its annual report:

“Sembcorp is committed to achieving sustainable income and growth to enhance total shareholder return.

The Group’s policy aims to balance cash return to shareholders and investment for sustaining growth, while maintaining an efficient capital structure. The company strives to provide consistent and sustainable ordinary dividend payments to its shareholders on an annual basis.”

In short, Sembcorp Industries is looking at how it can balance the need for growth and the need to reward shareholders. However, there was no metric shared on what level the company’s dividend would be.

4. Historical dividend per share

Here’s a chart showing Sembcorp Industries’ dividend in the last five years:

Source: SembCorp Industries’ annual report

The conglomerate kept its ordinary dividend relatively stable from 2012 to 2014, paying out between 15 cents and 16 cents per share. However, the dividend took a hit in 2015, falling from 16 cents per share in 2014 to 11 cents per share. The dividend was further reduced to just eight cents per share in 2016.

Sembcorp Industries’ lack of free cash flow and higher debt may be the cause of this decline in its dividends. You can read more about it here.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Chin Hui Leong doesn’t own shares in any companies mentioned.

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